Economist Says Tax Revenue Will Continue to Fall

No good news about local tax money came out of a meeting today at the state capitol.

Talking to local and state officials, economist Stan Chervin put it this way:

“The major problem the state faces in the next nine months is the decrease in the state sales tax, which probably won’t turn around, at the earliest, until Christmas.”

Chervin says sales taxes paid to state and local governments have fallen for two straight years. And it will get worse before it gets better.

Murfreesboro Mayor Tommy Bragg says his city has already planned cutbacks.

“We will slow down on adding police officers, that we had budgeted. We’ll probably mothball a fire hall that’s under construction and not hire new firefighters. And we’ll slow down on our road projects, and there won’t be any schools built.”

Bragg says he expects many citizens will put off paying their property taxes. Unfortunately, he says, the late fees they pay won’t bring in significant money for cities and counties.

WEB EXTRA

Members of TACIR, theTennessee Advisory Commission on Intra-Governmental Relations, met today at the state capitol. The group, for the most part, looks at funding issues between the state and local governments.

Mayor Bragg talked about the slow pay by taxpayers as a logical outcome of an economic credit crunch. Many taxpayers are used to borrowing the money to pay their property taxes.

“I think that since the lending activity across the state may have slowed down, that some people will find that borrowing money from local government, and paying the fees, will be an alternative to going out, like they used to, and borrowing their taxes, and paying them off over the year.”

State Senator Jim Tracy from Shelbyville, also a member of the commission, says the legislature is waiting to see if Governor Phil Bredesen can shore up the funding for the Basic Education Program, the BEP, even if other things have to be cut.

“I think the governor is working on a budget now, from what I understand, that’s gonna cut some things out of K through 12, but hopefully we can maintain BEP, and hopefully health care will stay at the same level it was. I know there’s some thoughts about the stimulus package may help health care, the federal contribution to health care in Tennessee.”

Tracy says the federal stimulus package is an unknown that might help state and local governments with education, health care and building roads and infrastructure,.

Meanwhile, Tracy says the state faces a balancing act between funding higher education, K through 12 education, health care and infrastructure – that is, building roads, bridges and water systems.

“Reducing the amount of money we’re sending to higher ed and causing the tuition to go up, that’s the number one concern, I think, our education funding. And the governor has decided he would like to keep the BEP funding at the same level it was last year. So those are… that’s big, important. Of course, infrastructure, as we talked about today, is a big important thing, and will health care, those are three big issues, and in state government, we’re gonna have to just tighten our belts and we have to balance our budget, it’s not like the federal government, where they don’t have to balance the budget.”

Tracy is a Republican, Bragg a Democrat.

Dr. Stan Chervin’s presentation to TACIR is here.

Note that page 10 shows year-to-date tax collections, August through December 2008.

Page 12 shows the fall-off of sales tax growth from 2006 to 2008.

Page 13 shows sales tax “growth” by category of purchase, this year compared to the same period last year – note that the numbers are negative.

Dr. Reuben Kyle of Middle Tennessee State University added this brief summary of what the federal stimulus package would be, so far.